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Special Reports
Warehouse Lending
Access: Broker Demand for Lines Has Surged
By Joshua Brustein
SUGARLAND, TX--As of late, warehouse lenders are beginning to see great potential
in the market of mortgage brokers who are interested in becoming correspondent lenders. For Access Lending, though,
dealing with this market is just business as usual.
When it began operations six years ago, Access Lending only dealt with brokers
who were becoming bankers and looking to acquire their first warehouse lines. There has been a steady interest
in switching for the tenure of the company's existence, said David Fleig, the chairman and CEO at Access. But with
new incentives driving brokers its way, the demand for warehouse lines has surged.
The main reason that brokers want to become bankers lately is the seeming inevitability
of the passage of Real Estate Settlement and Procedures Act reforms that would give mortgage bankers a distinctive
edge over brokers in issues like disclosure. Most industry observers agree that these changes will go through in
some form.
But Mr. Fleig sees several other factors driving this trend, as well.
"Most of these folks have been too busy until very recently to rush into
anything -- they've been too busy closing loans, " he said. "But we have seen a huge amount of interest
this year." As volume slows to more reasonable rates, brokers will have a chance to take a breath and contemplate
big changes to their business strategies.
The prospect of investors beginning to price correspondent loans more rationally
with respect to wholesale loans, said Mr. Fleig, may also make brokers see the advantage in operating as correspondent
lenders. The price premium for correspondents has been nearly erased, noted Mr. Fleig, but this looks ready to
reverse course.
These factors have led to more brokers coming to Access in search of a warehouse
line. It has also meant that the company has advised a much larger percentage of prospective customers against
obtaining a warehouse line. Before the current increase in interest, Access told about 25% of brokers who came
to it looking for a warehouse line that this wasn't the right choice. In the last six to nine months, that number
has been closer to 50%.
"We've always said that there's a lot of mortgage brokers who should consider
[getting a warehouse line], and there's probably a lot that shouldn't," said Mr. Fleig. "It really needs
to be a win-win. It doesn't do any good for us to bring on a warehouse customer if they're not going to have a
good experience."
According to Mr. Fleig, a lot of brokers who are coming forward are harboring
some misconceptions about the requirements needed to become a banker. Often they do not understand the amount of
working capital or net worth needed, or are not prepared to deal with the staffing and management issues that accompany
the acquisition of a warehouse line.
Both in order to protect its own interests, and to make sure that no broker gets
in over his head, Access emphasizes experience as an important trait for new customers, as well as liquidity, cash
flow and net worth.
Access is also no longer only looking at brokers to build its business. In order
to grow at the pace it wants -- Mr. Fleig hopes to double the company's business over the next few years -- the
company wants to capture larger lenders. It has already moved away from the broker market somewhat. Currently only
about one in three of its customers come to Access for their first lines.
"I don't think we will achieve our growth objectives solely with that type
of customer," said Mr. Fleig. "That typically starts off with low volume and takes some time to mature."
Bankers looking for an extra warehouse line, or to switch warehouse lenders altogether,
are another market that catches Mr. Fleig's eye. Picking up new clients as volumes drop throughout the industry
is necessary, he says, since individual lenders will probably be bringing in smaller volumes.
The bread and butter of Access Lending's business is $10 million to $20 million
lines, and it currently funds about $300 million a month to approximately 60 customers in 25 states.
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